Presale prices have surged 67%, while construction costs are up 38%... “Seoul needs to ease the burden of land costs”

[Financial News]  An analysis has found that the rise in presale prices cannot be explained by construction costs alone: nationwide presale prices have risen 67.0% since 2020, while construction costs have increased 38.2%. The analysis noted that land costs weigh relatively heavily in Seoul, while construction costs such as materials and labor weigh more heavily in provincial areas, calling for responses tailored to regional cost structures.
According to a report released on the 29th by the Construction Economy Research Institute of Korea (the institute), the gap between the increases in the nationwide presale price index and construction cost index, compared with 2020, stood at 28.8 percentage points as of June this year. The gap widened particularly from 2023 onward, as the two indices moved in different directions.
The factors driving up presale prices also varied by period. Construction costs, particularly materials costs, had a major impact in 2021–2022, while the effects of land costs and the residual grew in 2023–2025. The analysis found that construction costs contributed more again in the first half of this year.
Of the 13.5% rise in presale prices in 2024, land costs contributed 5.5 percentage points, construction costs 2.1 percentage points, and the residual 5.9 percentage points. In the first half of this year, presale prices rose 5.3%, with construction costs accounting for 3.5 percentage points. Materials costs contributed 2.0 percentage points of that increase, with certain categories, including primary metals and chemical products, having a particularly notable impact.
The report estimated the factors behind rising presale prices by dividing them into land costs, “construction costs for analytical purposes,” and a residual. Construction costs for analytical purposes are a broader concept than straightforward building costs: they include not only materials and labor costs but also developers’ business expenses, financing costs, and profits. The residual is the portion not explained by the estimated cost items and reflects a combination of factors, including project duration, market conditions, and differences in the scope and classification of the data.
Regional differences were particularly pronounced in land costs. From July last year through June this year, land costs accounted for an average of 61.1% in Seoul, the only area nationwide where the share exceeded 50%. The figure for other provincial areas was 24.8%, making Seoul’s share about 2.5 times as high.
Conversely, materials costs accounted for 16.5% of presale prices in Seoul and 31.9% in other provincial areas, a share about 1.9 times higher in the provinces. The institute explained, however, that this analysis applied the average input structure in the input-output table and did not mean actual construction costs in provincial areas were lower than in the Seoul metropolitan area. Depending on conditions for procuring and transporting materials and labor, the same price shock could place a heavier burden on provincial areas.
The institute proposed expanding housing supply to ease the burden of land costs in high-land-price areas such as Seoul, while taking steps in provincial areas to reduce upward pressure on construction costs and improve conditions for procuring materials and labor. It also said that project delays caused by permitting holdups and tighter regulations and standards, as well as accumulating financing costs, need to be managed.
Senior Research Fellow Park Cheol-han explained, “Stabilizing presale prices is difficult to achieve through price suppression alone,” adding, “We need to manage both the cost factors that make up presale prices and the business and institutional conditions that give rise to them.”


[email protected] Choi Ga-young Reporter